Monday, October 4, 2010

Mortgage Mess Part 2

This can't be good.

As home and property foreclosures mount - Fidelity National has told lenders to halt foreclosures, and to stop sales of bank owned properties. The reason, and this should be no surprise to anyone, is "possible document flaws."

The Washington Post reported:
A top federal bank regulator said Thursday that he has directed seven of the nation's largest lenders to review their foreclosure processes after learning about the widespread mishandling of homeowner evictions by the industry.

John Walsh, acting director of the Office of the Comptroller of the Currency, told lawmakers during a hearing on the financial regulatory overhaul enacted this summer that some lenders "clearly had deficiencies" in their system for foreclosures.

The banks contacted by regulators include J.P. Morgan Chase, which announced Wednesday that it was freezing 56,000 foreclosures after finding errors in its preparation of documents, according to OCC spokesman Kevin Mukri. Other lenders contacted include Bank of America, Citibank, HSBC, PNC Bank, U.S. Bank and Wells Fargo.

"We both want to see that they fix the processing problems but also to look to see whether there is specific harm [that has been caused] in individual cases," Walsh said. ...

The paperwork problems range from potentially forged documents to bank employees who never read borrowers' files before signing off on an eviction.

People purchasing some of these "troubled assets" may be in for a rude awakening if the property they purchased does not include a valid title because of a flawed foreclosure.

The New York Times reported:
As more defaulting homeowners become aware of the lenders’ problems, they are expected to hire lawyers and challenge the proceedings against them. And if completed foreclosures were not properly done, families who bought the troubled homes could be vulnerable to claims by the former owners.

Apparently alarmed about such a possibility, one of the major title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that “until further notice” it would not insure title to properties foreclosed upon by GMAC Mortgage, the country’s fourth-largest home lender and one of the two big lenders at the center of the current controversy.

These mortgage companies and banks were supposed to do what they could to help people stay in their homes and rework their loan obligations.

Expect to see a rash of new lawsuits against these banking institutions... I can just see the TV commercials now asking for people to come forward if they have been evicted improperly from their home... and just remember that less than one-half of one per-cent of all applications for loan modification or forbearance were approved by the banks through June 2010. Also, you may recall that banks got gobs of "TARP" money from Washington DC so that they could write off many if not all of these loans. So it seems that they were in a rush to get these people out so they could resell the property and make even more money on the deal!


And what did "Sweetheart Countrywide Mortgage Recipient" Senator Chris Dodd (D-CT), chairman of the Senate banking committee, say about all of this?

He said it was, "Very Troubling".

Now, that's got to be the understatement of the year!